Commissioner v. Schleier

515 U.S. 323 (1995)

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Nature of the Case

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Facts

P is a former employee of United Airlines, Inc. (United). Pursuant to established policy, United fired P when he reached the age of 60. P then filed a complaint in Federal District Court alleging that his termination violated the ADEA. The ADEA incorporates many of the enforcement and remedial mechanisms of the Fair Labor Standards Act of 1938 (FLSA). Like the FLSA, the ADEA provides for 'such legal or equitable relief as may be appropriate to effectuate the purposes of this chapter.' The ADEA specifically provides that 'liquidated damages shall be payable only in cases of willful violations of this chapter.' 29 U.S.C. § 626(b). Second, the Courts of Appeals have unanimously held, that the ADEA does not permit a separate recovery of compensatory damages for pain and suffering or emotional distress. The ADEA claims were tried before a jury, which determined that United had committed a willful violation of the ADEA. The District Court entered judgment for Ps, but that judgment was reversed on appeal. The parties then entered into a settlement, pursuant to which P received $145,629. Half of respondent's award was attributed to 'backpay' and half to 'liquidated damages.' P included as gross income the backpay portion of the settlement but excluded the portion attributed to liquidated damages. D issued a deficiency notice. P then initiated proceedings in the Tax Court, claiming that he had properly excluded the liquidated damages. The Tax Court agreed with P that the entire settlement constituted 'damages received . . . on account of personal injuries or sickness' within the meaning of § 104(a)(2) of the Tax Code and was therefore excludable from gross income. The Court of Appeals for the Fifth Circuit affirmed. The Supreme Court granted certiorari.